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Exam 10: Plant Assets, Natural Resources, and Intangibles

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Question 61

True/False

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If a company uses the contra account, Accumulated Amortization, this account is typically shown on the balance sheet.

A) True
B) False

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Question 62

Multiple Choice

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Which of the following is included in the cost of land?

A) cost of fencing
B) cost of paving
C) brokerage commission
D) cost of outdoor lighting

E) All of the above
F) A) and B)

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Question 63

Multiple Choice

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Cardoza Corp. purchased a mine on January 1, 2016, for $513,000, which is estimated to contain 30,000 tons of iron ore. There is no residual value. The business extracted and sold 12,500 tons of ore in 2016 and 16,800 tons of ore in 2017. What is the depletion expense for 2017?(Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

According to Generally Accepted Accounting Principles, if the fair value of goodwill decreases below its book value, an impairment loss must be recorded.

On January 1, 2017, Henry Manufacturing Corporation purchased a machine for $40,600,000. Henry's management expects to use the machine for 33,000 hours over the next six years. The estimated residual value of the machine at the end of the sixth year is $45,000. The machine was used for 3,600 hours in 2017 and 5,000 hours in 2018. Calculate the book value of the machine at the end of 2018 if the company uses the units-of-production method of depreciation. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

Which of the following requires businesses to record depreciation?

Which of the following is a characteristic of a plant asset, such as a building?

The asset turnover ratio is calculated by dividing cost of goods sold by average total assets.

Houlihan, Inc. purchased a van on January 1, 2016, for $800,000. Estimated life of the van was five years, and its estimated residual value was $90,000. Houlihan uses the straight-line method of depreciation. Give the journal entry to record the depreciation expense for 2016 on the van.

Land and land improvements are one and the same and therefore must be recorded in single account.

An oil well cost $1,862,500 and is calculated to hold 250,000 barrels of oil. There is no residual value. Which journal entry is needed to record the expense for the extraction of 36,000 barrels of oil during the year? All 36,000 barrels were sold ding the year. (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

On October 1, 2017, Nurix, Inc. purchased a patent for $200,000 cash. Although the patent gives legal protection for 20 years, the patent is expected to be used for only 10 years. What will be the balance in the patent account on September 30, 2018?

If a business changes the estimated useful life, or estimated residual value, of a plant asset, depreciation expense must be recalculated.

Plant assets are long-lived, tangible assets used in the operation of a business.

The use of MACRS is acceptable for financial reporting under GAAP.

The asset turnover ratio measures ________.

Metro Auto Parts recently traded in store fixtures. The exchange had commercial substance. The old fixtures had a cost of $48,000 and accumulated depreciation of $16,000. Metro paid $106,000 for the new store fixtures. These new fixtures had a market value of $119,000. There is a loss of $19,000 on this exchange.

The cost of an asset is $10,000,000, and its residual value is $100,000. Estimated useful life of the asset is four years. Prepare the schedule of depreciation using the double-declining-balance method of accounting.

All intangible assets must be amortized each year.

Which of the following depreciation methods allocates a varying amount of depreciation each year based on an asset's usage?